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M.D.C. Holdings Announces 2016 First Quarter Results

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May 5, 2016 6:00 AM EDT

DENVER, May 5, 2016 /PRNewswire/ -- M.D.C. Holdings, Inc. (NYSE: MDC) announced results for the quarter ended March 31, 2016.

2016 First Quarter Highlights and Comparisons to 2015 First Quarter

  • Net income of $9.6 million, or $0.20 per share vs. $8.4 million or $0.17 per share
    • Pretax income of $14.3 million vs. $13.3 million
  • Home sale revenues of $394.4 million, up 5% from $377.0 million
  • Gross margin from home sales up 90 basis points to 16.3% vs. 15.4%
    • 2016 first quarter gross margin was negatively impacted by 80 basis points due to a $3.0 million warranty accrual adjustment
  • Dollar value of net new orders of $731.3 million, up 10%
    • Net new orders of 1,646, up 3%; eighth consecutive quarter of year-over-year growth
  • Ending backlog dollar value of $1.43 billion, up 50%
    • Ending backlog units of 3,071, up 39%

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "We are pleased with the start to our 2016 spring selling season, as we recorded an eighth consecutive quarter of year-over-year growth in our net new orders. The homebuilding industry continues to slowly gain momentum, as a result of healthy demand drivers, such as low unemployment, positive consumer confidence, wage growth and low interest rates, combined with a limited supply of new and existing home inventories."

Mr. Mizel continued, "After renewing our focus on build-to-order homes in 2015, we improved both our top and bottom line results in the 2016 first quarter, based on growth in our average selling price and gross margin percentage. We achieved these improvements while not significantly increasing our homebuilding assets, resulting in a better return on investment for our Company."

Mr. Mizel concluded, "Driving continued improvement to our returns remains a key focus for the Company in 2016. To that end, we are working on improving the cycle time for our existing home plans, in part by addressing issues caused by limited subcontractor availability in certain of our larger markets. In addition, we are expanding the geographical footprint of our new, more affordable product line, which is already available in our Colorado and Arizona markets. We believe this new product will increase our sales velocity by appealing to an expanding consumer segment that was previously priced out of the market. The new home designs are aimed at putting homeownership within reach for an under-served segment of buyers.  The designs will help us reduce cycle times through a more streamlined and efficient design, but also allow homebuyers to personalize their homes with fixtures and finishes like our other Richmond American homes."

Homebuilding

Home sale revenues for the 2016 first quarter increased 5% to $394.4 million, compared to $377.0 million for the prior year period. This improvement was driven by a 5% increase in average selling price, primarily due to a mix shift to higher-priced submarkets and, to a lesser extent, price increases implemented in the prior year.

Gross margin from home sales for the 2016 first quarter was up 90 basis points from the same period in 2015. The increase was primarily due to (1) a higher percentage of our deliveries coming from build-to-order sales, which typically have higher gross margins when compared to deliveries of homes that were started without a sales contract, and (2) a 50 basis point improvement in our interest in cost of sales as a percentage of home sale revenues. These items were partially offset by an 80 basis point negative adjustment to our warranty accrual in the 2016 first quarter, which resulted from higher than expected recent warranty related expenditures.

Selling, general and administrative ("SG&A") expenses for the 2016 first quarter were $56.3 million, up $5.8 million from $50.5 million for the same period in 2015. Our SG&A expenses as a percentage of home sale revenues ("SG&A rate") increased by 90 basis points to 14.3% for the 2016 first quarter from 13.4% in the 2015 first quarter. The 90 basis point increase in our SG&A rate was driven primarily by an increase in compensation-related expenses, due to an increase in headcount and an additional $2.5 million of expense related to a stock option grant approved in the 2015 second quarter.

The dollar value of net new orders for the 2016 first quarter increased 10% to $731.3 million from $666.5 million for the same period in 2015. The improvement was the result of a 6% increase in our average selling price and a 3% increase in the net number of homes sold, which was driven by a 3% increase in our average active community count. The increase in average selling price is the result of price increases implemented in many of our active communities over the past year, coupled with a shift in mix to higher priced communities. Our cancellation rate for the 2016 first quarter increased slightly to 18% from 17% for the same period in the prior year.

Our backlog value at the end of the 2016 first quarter was up 50% year-over-year to $1.43 billion. The increase was due mostly to a 39% increase in units in backlog, driven primarily by year-over-year increases in net new orders for each of the past eight quarters, a higher percentage of build-to-order sales, which are generally in backlog for a longer period of time, and longer than average construction times as a result of limited subcontractor availability in certain of our larger markets.

Financial Services

Income before taxes for our financial services operations for the 2016 first quarter was $5.6 million, a $0.3 million increase from $5.3 million in the 2015 first quarter. The increase in pretax income was primarily the result of year-over-year increases in gains on loans locked and sold by our mortgage operations segment.

About MDC

Since 1972, MDC's subsidiary companies have built and financed the American dream for more than 185,000 homebuyers. MDC's commitment to customer satisfaction, quality and value is reflected in each home its subsidiaries build. MDC is one of the largest homebuilders in the United States. Its subsidiaries have homebuilding operations across the country, including the metropolitan areas of Denver, Colorado Springs, Salt Lake City, Las Vegas, Phoenix, Tucson, Riverside-San Bernardino, Los Angeles, San Diego, Orange County, San Francisco Bay Area, Sacramento, Washington D.C., Baltimore, Orlando, Jacksonville, South Florida and Seattle. The Company's subsidiaries also provide mortgage financing, insurance and title services, primarily for Richmond American homebuyers, through HomeAmerican Mortgage Corporation, American Home Insurance Agency, Inc. and American Home Title and Escrow Company, respectively. M.D.C. Holdings, Inc. is traded on the New York Stock Exchange under the symbol "MDC." For more information, visit www.mdcholdings.com.

Forward-Looking Statements

Certain statements in this release, including statements regarding our business, financial condition, results of operation, cash flows, strategies and prospects, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of MDC to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among other things, (1) general economic conditions, including changes in consumer confidence, inflation or deflation and employment levels; (2) changes in business conditions experienced by MDC, including cancellation rates, net home orders, home gross margins, land and home values and subdivision counts; (3) changes in interest rates, mortgage lending programs and the availability of credit; (4) changes in the market value of MDC's investments in marketable securities; (5) uncertainty in the mortgage lending industry, including repurchase requirements associated with HomeAmerican Mortgage Corporation's sale of mortgage loans (6) the relative stability of debt and equity markets; (7) competition; (8) the availability and cost of land and other raw materials used by MDC in its homebuilding operations; (9) the availability and cost of performance bonds and insurance covering risks associated with our business; (10) shortages and the cost of labor; (11) weather related slowdowns and natural disasters; (12) slow growth initiatives; (13) building moratoria; (14) governmental regulation, including the interpretation of tax, labor and environmental laws; (15) terrorist acts and other acts of war; (16) changes in energy prices; and (17) other factors over which MDC has little or no control. Additional information about the risks and uncertainties applicable to MDC's business is contained in MDC's Form 10-Q for the quarter ended March 31, 2016, which is scheduled to be filed with the Securities and Exchange Commission today.  All forward-looking statements made in this press release are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this press release will increase with the passage of time. MDC undertakes no duty to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in our subsequent filings, releases or webcasts should be consulted.

M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income

Three Months Ended

March 31,

2016

2015

(Dollars in thousands, except per share amounts)

(Unaudited)

Homebuilding:

Home sale revenues

$

394,420

$

377,009

Land sale revenues

2,324

910

Total home and land sale revenues

396,744

377,919

Home cost of sales

(330,026)

(318,642)

Land cost of sales

(1,663)

(1,125)

Inventory impairments

-

(350)

Total cost of sales

(331,689)

(320,117)

Gross margin

65,055

57,802

Selling, general and administrative expenses

(56,277)

(50,532)

Interest and other income

1,850

1,865

Other expense

(1,541)

(1,145)

Other-than-temporary impairment of marketable securities

(431)

-

Homebuilding pretax income

8,656

7,990

Financial Services:

Revenues

11,017

10,591

Expenses

(6,241)

(6,159)

Interest and other income

841

904

Financial services pretax income

5,617

5,336

Income before income taxes

14,273

13,326

Provision for income taxes

(4,710)

(4,906)

Net income

$

9,563

$

8,420

Other comprehensive income related to

available for sale securities, net of tax

1,948

1,308

Comprehensive income

$

11,511

$

9,728

Earnings per share:

Basic

$

0.20

$

0.17

Diluted

$

0.20

$

0.17

Weighted average common shares outstanding

Basic

48,827,971

48,714,637

Diluted

48,833,444

48,891,514

Dividends declared per share

$

0.25

$

0.25

 

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

March 31,

December 31,

2016

2015

ASSETS

(Dollars in thousands, except

per share amounts)

Homebuilding:

(Unaudited)

Cash and cash equivalents

$

99,031

$

144,342

Marketable securities

77,154

92,387

Restricted cash

3,349

3,750

Trade and other receivables

38,096

23,314

Inventories:

Housing completed or under construction

862,515

747,036

Land and land under development

948,767

1,016,926

Total inventories

1,811,282

1,763,962

Property and equipment, net

29,374

28,226

Deferred tax asset, net

95,880

99,107

Metropolitan district bond securities (related party)

27,277

25,911

Prepaid and other assets

62,932

65,394

Total homebuilding assets

2,244,375

2,246,393

Financial Services:

Cash and cash equivalents

39,504

36,646

Marketable securities

12,268

11,307

Mortgage loans held-for-sale, net

82,193

115,670

Other assets

7,466

5,883

Total financial services assets

141,431

169,506

      Total Assets

$

2,385,806

$

2,415,899

LIABILITIES AND EQUITY

Homebuilding:

Accounts payable

$

46,669

$

40,472

Accrued liabilities

110,791

122,886

Revolving credit facility

15,000

15,000

Senior notes, net

840,798

840,524

Total homebuilding liabilities

1,013,258

1,018,882

Financial Services:

Accounts payable and accrued liabilities

54,033

52,114

Mortgage repurchase facility

60,221

88,611

Total financial services liabilities

114,254

140,725

      Total Liabilities

1,127,512

1,159,607

Stockholders' Equity

Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding

-

-

Common stock, $0.01 par value; 250,000,000 shares authorized; 49,006,835 and 48,888,424

 issued and outstanding at March 31, 2016 and December 31, 2015, respectively

490

489

Additional paid-in-capital

918,488

915,746

Retained earnings

321,653

324,342

Accumulated other comprehensive income

17,663

15,715

Total Stockholders' Equity

1,258,294

1,256,292

Total Liabilities and Stockholders' Equity

$

2,385,806

$

2,415,899

 

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

Three Months Ended

March 31,

2016

2015

(Dollars in thousands)

(Unaudited)

Operating Activities:

Net income

$

9,563

$

8,420

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Stock-based compensation expense

2,987

875

Depreciation and amortization

1,073

1,083

Inventory impairments

-

350

Other-than-temporary impairment of marketable securities

431

-

Loss on sale of marketable securities

915

11

Amortization of discount / premiums on marketable debt securities, net

-

59

Deferred income tax expense

1,788

4,713

Net changes in assets and liabilities:

      Restricted cash

401

(1,444)

      Trade and other receivables

(15,251)

(6,141)

      Mortgage loans held-for-sale

33,477

23,684

      Housing completed or under construction

(115,357)

4,282

      Land and land under development

68,311

(1,274)

      Prepaid expenses and other assets

911

489

      Accounts payable and accrued liabilities

(4,234)

(19,681)

Net cash provided by (used in) operating activities

(14,985)

15,426

Investing Activities:

Purchases of marketable securities

(5,482)

(20,484)

Maturities of marketable securities

-

1,510

Sales of marketable securities

20,600

12,976

Purchases of property and equipment

(1,944)

(340)

Net cash provided by (used in) investing activities

13,174

(6,338)

Financing Activities:

Payments on mortgage repurchase facility, net

(28,390)

(20,785)

Dividend payments

(12,252)

(12,213)

Net cash used in financing activities

(40,642)

(32,998)

Net decrease in cash and cash equivalents

(42,453)

(23,910)

Cash and cash equivalents:

      Beginning of period

180,988

153,825

      End of period

$

138,535

$

129,915

 

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data

New Home Deliveries

 Three Months Ended March 31, 

2016

2015

 % Change

 Homes

 Dollar

Value

 Average Price

 Homes

 Dollar

Value

 Average Price

 Homes

 Dollar

Value

 Average Price

(Dollars in thousands)

Arizona

160

$

45,062

$

281.6

150

$

46,886

$

312.6

7%

(4)%

(10)%

California

125

75,530

604.2

140

68,986

492.8

(11)%

9%

23%

Nevada

107

38,426

359.1

111

40,914

368.6

(4)%

(6)%

(3)%

Washington

74

32,357

437.3

56

20,031

357.7

32%

62%

22%

West

466

191,375

410.7

457

176,817

386.9

2%

8%

6%

Colorado

249

121,575

488.3

245

111,938

456.9

2%

9%

7%

Utah

39

14,575

373.7

31

11,172

360.4

26%

30%

4%

Mountain

288

136,150

472.7

276

123,110

446.1

4%

11%

6%

Maryland

34

15,806

464.9

56

27,156

484.9

(39)%

(42)%

(4)%

Virginia

40

20,154

503.9

59

29,120

493.6

(32)%

(31)%

2%

Florida

79

30,935

391.6

61

20,806

341.1

30%

49%

15%

East

153

66,895

437.2

176

77,082

438.0

(13)%

(13)%

(0)%

Total

907

$

394,420

$

434.9

909

$

377,009

$

414.8

(0)%

5%

5%

 

Net New Orders

 Three Months Ended March 31, 

2016

2015

% Change

Homes

Dollar

Value

Average Price

Monthly Absorption Rate *

Homes

Dollar Value

Average Price

Monthly Absorption Rate *

Homes

Dollar Value

Average Price

Monthly Absorption Rate

(Dollars in thousands)

Arizona

223

$

65,541

$

293.9

2.38

225

$

59,721

$

265.4

2.08

(1)%

10%

11%

14%

California

229

141,684

618.7

3.72

229

120,963

528.2

3.76

0%

17%

17%

(1)%

Nevada

229

79,316

346.4

3.59

227

86,186

379.7

5.29

1%

(8)%

(9)%

(32)%

Washington

124

58,511

471.9

3.01

112

45,109

402.8

2.99

11%

30%

17%

1%

West

805

345,052

428.6

3.09

793

311,979

393.4

3.18

2%

11%

9%

(3)%

Colorado

493

228,841

464.2

4.11

490

223,955

457.1

3.82

1%

2%

2%

8%

Utah

66

23,993

363.5

2.84

66

23,531

356.5

3.49

0%

2%

2%

(19)%

Mountain

559

252,834

452.3

3.90

556

247,486

445.1

3.78

1%

2%

2%

3%

Maryland

89

42,147

473.6

2.58

67

33,370

498.1

2.54

33%

26%

(5)%

2%

Virginia

85

43,500

511.8

3.33

72

34,818

483.6

2.33

18%

25%

6%

43%

Florida

108

47,718

441.8

2.57

105

38,838

369.9

2.54

3%

23%

19%

1%

East

282

133,365

472.9

2.76

244

107,026

438.6

2.48

16%

25%

8%

11%

Total

1,646

$

731,251

$

444.3

3.26

1,593

$

666,491

$

418.4

3.22

3%

10%

6%

1%

* Calculated as total net new orders in period ÷ average active communities during period ÷ number of months in period

 

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data

Active Subdivisions

Average Active Subdivisions

Active Subdivisions

Three Months Ended

March 31,

%

March 31,

%

2016

2015

Change

2016

2015

Change

Arizona

30

36

(17)%

31

36

(14)%

California

21

22

(5)%

21

20

5%

Nevada

23

10

130%

21

14

50%

Washington

12

13

(8)%

14

13

8%

West

86

81

6%

87

83

5%

Colorado

40

45

(11)%

40

43

(7)%

Utah

8

6

33%

8

6

33%

Mountain

48

51

(6)%

48

49

(2)%

Maryland

13

9

44%

12

9

33%

Virginia

7

10

(30)%

9

10

(10)%

Florida

15

15

0%

14

14

0%

East

35

34

3%

35

33

6%

Total

169

166

2%

170

165

3%

 

Backlog

March 31,

2016

2015

% Change

Homes

Dollar

Value

Average Price

Homes

Dollar

Value

Average Price

Homes

Dollar

Value

Average Price

(Dollars in thousands)

Arizona

384

$

116,646

$

303.8

306

$

88,599

$

289.5

25%

32%

5%

California

446

297,790

667.7

281

149,351

531.5

59%

99%

26%

Nevada

317

107,850

340.2

271

104,686

386.3

17%

3%

(12)%

Washington

229

109,733

479.2

111

45,216

407.4

106%

143%

18%

West

1,376

632,019

459.3

969

387,852

400.3

42%

63%

15%

Colorado

1,066

516,264

484.3

824

382,025

463.6

29%

35%

4%

Utah

135

48,215

357.1

75

25,783

343.8

80%

87%

4%

Mountain

1,201

564,479

470.0

899

407,808

453.6

34%

38%

4%

Maryland

145

70,575

486.7

79

39,856

504.5

84%

77%

(4)%

Virginia

146

76,790

526.0

103

50,864

493.8

42%

51%

7%

Florida

203

89,046

438.7

153

66,569

435.1

33%

34%

1%

East

494

236,411

478.6

335

157,289

469.5

47%

50%

2%

Total

3,071

$

1,432,909

$

466.6

2,203

$

952,949

$

432.6

39%

50%

8%

 

M.D.C. HOLDINGS, INC.

Homebuilding Operational Data

Homes Completed or Under Construction (WIP lots)

March 31,

%

2016

2015

Change

Unsold:

Completed

133

326

(59)%

Under construction

266

419

(37)%

Total unsold started homes

399

745

(46)%

Sold homes under construction or completed

2,169

1,519

43%

Model homes under construction or completed

296

279

6%

Total homes completed or under construction

2,864

2,543

13%

 

Lots Owned and Options (including homes completed or under construction)

March 31, 2016

March 31, 2015

Lots Owned

Lots Optioned

Total

Lots Owned

Lots Optioned

Total

Total % Change

Arizona

1,575

247

1,822

2,138

40

2,178

(16)%

California

1,754

232

1,986

1,468

150

1,618

23%

Nevada

2,234

-

2,234

1,765

52

1,817

23%

Washington

892

19

911

830

-

830

10%

West

6,455

498

6,953

6,201

242

6,443

8%

Colorado

3,892

819

4,711

4,089

699

4,788

(2)%

Utah

403

72

475

561

-

561

(15)%

Mountain

4,295

891

5,186

4,650

699

5,349

(3)%

Maryland

354

199

553

399

376

775

(29)%

Virginia

528

152

680

613

322

935

(27)%

Florida

1,035

194

1,229

936

121

1,057

16%

East

1,917

545

2,462

1,948

819

2,767

(11)%

Total

12,667

1,934

14,601

12,799

1,760

14,559

0%

 

M.D.C. HOLDINGS, INC.

Other Financial Data

Selling, General and Administrative Expense

 Three Months Ended

 March 31, 

2016

2015

(Dollars in thousands)

(Unaudited)

General and administrative expenses

$

31,465

$

25,914

Marketing expenses

12,034

12,126

Commissions expenses

12,777

12,492

Selling, general and administrative expense

$

56,277

$

50,532

 

Capitalized Interest

 Three Months Ended

 March 31, 

 March 31, 

2016

2015

(Dollars in thousands)

(Unaudited)

Homebuilding interest incurred

$

13,218

$

13,251

Less:  Interest capitalized

(13,218)

(13,251)

Homebuilding interest expensed

$

-

$

-

Interest capitalized, beginning of period

$

77,541

$

79,231

Plus: Interest capitalized during period

13,218

13,251

Less: Previously capitalized interest included in home and land cost of sales

(10,976)

(12,491)

Interest capitalized, end of period

$

79,783

$

79,991

 

M.D.C. HOLDINGS, INC.

Reconciliations of Non-GAAP Financial Measures

Gross Margin from Home Sales Excluding Impairments, Interest in Cost of Sales and Warranty Adjustments (Unaudited)

Gross Margin from Home Sales Excluding Inventory Impairments and Warranty Adjustments, and Gross Margin from Home Sales Excluding Inventory Impairments, Warranty Adjustments and Interest in Cost of Sales are non-GAAP financial measures. We believe this information is meaningful as it isolates the impact that interest and impairments have on our Gross Margin from Home Sales and permits investors to make better comparisons with our competitors, who also break out and adjust gross margins in a similar fashion.

Three Months Ended

 March 31,2016

GrossMargin %

December 31,2015

GrossMargin %

March 31,2015

GrossMargin %

(Dollars in thousands)

Gross Margin

$

65,055

16.4%

$

89,207

15.8%

$

57,802

15.3%

Less: Land Sale Revenues

(2,324)

(10,521)

(910)

Add: Land Cost of Sales

1,663

10,667

1,125

Gross Margin from Home Sales

64,394

16.3%

89,353

16.1%

58,017

15.4%

Add: Inventory Impairments

-

5,292

350

Add: Warranty Adjustments

2,987

402

-

Gross Margin from Home Sales Excluding  Inventory Impairments and Warranty Adjustments

67,381

17.1%

95,047

17.1%

58,367

15.5%

Add: Interest in Cost of Sales

10,976

14,943

12,491

Gross Margin from Home Sales Excluding Inventory  Impairments, Interest in Cost of Sales, and Warranty Adjustments

$

78,357

19.9%

$

109,990

19.8%

$

70,858

18.8%

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/mdc-holdings-announces-2016-first-quarter-results-300263381.html

SOURCE M.D.C. Holdings, Inc.


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